Main ArticleAs nearly everyone in the financial world expected, despite all the theatrics and drama, Greece passed the vote for status quo bankster bailout austerity by a margin of 4 votes. What exactly does this "austerity" mean for the people? In short, there will be sharp tax increases, coupled along with cuts to benefits, pensions and many gov't job cuts.

Has Greece been living outside of its means for a long time? Certainly, and it has afforded them a very comfortable lifestyle that makes many other developed nations retirees look like indentured servants. However, the problem is that once the people are promised these luxuries with the full expectation that they will continue forever, they cannot be simply removed and expect the people to make drastic changes. Thus, the people of Greece are outraged. Some have been driven to the point of suicide as suicide rates have increased 40% since this financial crisis began. Other are taking to the streets, causing scenes of pure chaos.

The chain of events is occurring exactly as we expected - the vote passes, but the people riot and protest, shutting the entire nation down. In turn, "the vote" will have accomplished nothing as their overly optimistic "growth targets" will never be met as the economy sinks deeper and deeper. Greece is well beyond the point of no return. The same can be said of Portugal and Ireland. Spain however, just teeters on the point of no return but seems to be tipping ever closer to other side, whereby nothing can prevent the collapse of Spain's economy. Contagion is not a fad.

Which reminds us - the window dressing lipstick on the pig QE2 is ending today. Really. And QE2 Lite and QE3 will begin shortly via other methods. Watch for them in 3... 2... 1...

And like that, stage one of QE Lite is already here in the form of SPR release which, as we reported and expected, did absolutely nothing to quell the scorching price of oil. A quick glance at oil without rose colored glasses shows oil is up to $95.80. In other words, this political window dressing move did nothing lasting and will have the complete opposite effect.

Speaking of doing something that is not lasting, Quantitative Easing, which as we just said "ends" today (only to start up in another name), increased the Fed's balance sheet to $2.4 Trillion, making the Fed the largest holder of toilet paper U.S. bonds.

However, there is a very real reason for all of this. Rule number one in order for a "Wall Street reporter" to be successful and survive the jungle is to make certain the consensus of the article is always positive, even if right below the surface exists a closet full of junk. "Quick! Hide the Initial Claims data! Cover it up with big stories on the always bullish Chicago PMI data! And make it snappy."

Think of it this way. In order for a giant casino to be profitable, the operators of the casino must make the gamblers feel that they have a chance. If they felt the game was overly rigged and not in their favor, they would never return. Thus, Wall Street must keep this facade of "tomorrow will be better" or else this scam game is over faster than a Goldman Sachs High Frequency Algorithm can front run an order. That is why no matter how horrific the real economic data is, "tomorrow will always be better." The HFT algos promise.

In all seriousness, anyone concerned with the ongoing global crisis called Fukushima should set aside one hour to listen to this full interview with Arnie Gundersen. If the majority of people in North America knew what was really going on, the scenes in Greece would look like playtime. Wealth without health, is what?

Equity futures are slightly higher again this morning, the dollar is lower but bouncing, bonds are lower, oil is flat around $95, gold is slightly higher, silver is flat, and food commodities are mixed.

Of course the notion that Greece was “bailed out” is just a twisted euphemism for being stuck with even more impossible debt. That tragedy is far from over, in fact it was only made worse.

The bounce in our markets is already running into resistance. The VIX went down and touched the lower Bollinger band yesterday while the major averages all slammed into their upper Bollingers, none have broken the downtrend as of yet. Below is a daily chart of the DOW showing it up against the upper Bollinger, up against down slopping resistance, and just below the now down slopping 50dma:

The XLF gapped higher yesterday and closed above the upper Bollinger. Phony money galore, I hope they enjoy the little pop while they can, today is supposed to be the last of the $600 Billion QE2, however, when looking at the POMO schedule we find that today’s POMO operation is NOT the last, that they have operations scheduled on July the 6th and 11th, and a statement that a new POMO schedule will be posted on July 13th. So, there you have the end of QE2, and the unnamed beginning of QE3 with no end of the market manipulation whatsoever. Sold to them.

Meanwhile debt saturated Americans continue to wallow in low employment. Weekly Jobless Claims came in at 428,000 which is much higher than the consensus looking for 420k. Here’s Econohope:

HighlightsNo worse but only little better is the indication for the June employment report based on initial jobless claims which edged only 1,000 lower in the June 25 week to 428,000. A look at the four-week average, up 500 in the week to 426,750, shows no change from the May 28 week. But this month-to-month comparison of the four-week average does show improvement through the month, including an important 14,000 improvement in the household-survey sample week of June 18 vs May 14 (426,250 vs 440,250).

Continuing claims have also been improving slightly from a month ago, down 12,000 in data for the June 18 week to 3.702 million to bring the unemployment rate for insured workers down one tenth to 2.9 percent.

The Labor Department cites no special factors skewing the data. There's no significant initial market reaction to today's report.

While Americans may not have figured it out yet, the Greeks have – and the violence continues. Public workers in Britain are now also taking to the streets as the criminal “upper” class is robbing their retirement plans. There are clearly two sets of laws in the world at this juncture in history, those that apply to the money changers, and those that apply to everyone else. Look for more rioting here in America as the impossible math expresses itself more fully in the near future.

The Chicago PMI will be out shortly, that should be interesting and we’ll report it (almost) live right here, inside of our Daily Market Thread.

I found this on KWN. Just a clip or should I say tip of the iceberg? Shaza has been feeding me with good stuff and I added Rick Rule. Read it and listen if you have the time. QB

With a mountain of litigation claims against banks, today King World News interviewed the man Jim Rickards calls the best bank analyst in the country, Chris Whalen co-founder of Institutional Risk Analytics. When asked about JP Morgan’s exposure from litigation Whalen said, “The surviving 33 claims which are straight forward securities fraud claims, much like WorldCom, Enron and that sort of thing, those claims were settled at 50 cents on the dollar.

So today of the trillion dollars or so in class action claims that were filed right after the crisis started, there’s about $200 billion left that have survived motions to dismiss and other procedural efforts by the banks to knock this litigation out. JP Morgan has somewhere around $45 to $50 billion worth of current claims that look like they are going to go to trial.”

Greece is First Car in Fiscal ‘Train Wreck’: RBA

Greece is one of several nations that will need to cut spending and boost taxes, slowing global growth even as low interest rates raise the risk of inflation, Australian central bank board member Warwick McKibbin said.

The fiscal outlook “is what I call the slow motion train wreck -- the first carriage to break is going to be the Greek economy, but we have a series of economies facing very serious fiscal adjustment,” said McKibbin, a professor at Australian National University whose board term ends July 30, in a speech in Melbourne today. He said his comments reflected his personal views, not those of the Reserve Bank of Australia.

Macro Economic Clues Through the Metals Charts

Some metals are used to gauge the health of economy either at home or abroad or specific sectors. Others are used to to talk about inflation expectations. It makes no sense to put these long term concepts into the daily or even weekly charts of the price action for metals and hope to glean insights. These concepts play out over months not days or hours. Since it is less than two trading days from end of the June and the Greek austerity vote has passed, I am going to gamble on current monthly ranges for the major metals not being violated and see what we can learn looking at the monthly Futures charts using the Andrew’s Pitchfork.

Equity futures are higher again this morning, the reason du jour being the Greek Parliament’s passing of yet another phony “bailout.” As if dumping oceans of debt on someone bails them out. As if “restructuring” bonds into permanent fixtures that never ever retire is some sort of cure. As if forcing the populace to pay higher taxes to the wealthy class actually moves an economy forward. Of course the people are rioting, they recognize a stick-up when they see one, and they know who the victims are. In the U.S. we remain oblivious to reality as we are placated with endless tripe from those who stole the ability to produce our money. So the dollar goes down some more, bonds sink a little lower, oil rises a little higher, gold & silver continue to climb, and food commodities rise on the hope the dopes can keep their robbery in motion a little longer. We’ll be revisiting this Greek tragedy soon enough.

News flash for ya – there is only one real way to bail Greece out, and that’s through the process of default. Default eliminates their debt saturated condition and nothing else will except debt forgiveness which is exactly the same thing, with exactly the same results. The U.S., of course, is in a FAR deeper hole than all the PIIGS but again we don’t acknowledge reality because we are baffled with phony debt to GDP boloney that doesn’t consider the “Fed’s” balance sheet, our off balance sheet debt, nor any of our future financial obligations. If you or I used that type of accounting we’d be in prison. Do the math, and our true debt compared to our income – the only measurement that really matters – and you will find that there is no place on earth like America. It’s nice to be temporarily unaware, what a luxury to be the world’s purveyor of fraud.

Speaking of fraudsters, the hypocritical Mortgage Banker’s Association says that their Purchase Index fell another 3.0% last week – nice of them to invent a number that doesn’t move 20% or 30% in one week, maybe they are reading here that we don’t really believe that kind of action? Here’s Econospin speechless over the fact that interest rates fell and yet refinancing activity also fell:

HighlightsMortgage applications for home purchases extended their June decline, falling 3.0 percent in the June 24 week in results that point to weakness for the month's home sales. Applications for refinancing fell 2.6 percent, but unlike purchase applications, have been trending higher most of the month. Mortgage rates fell significantly in the week, down 11 basis points for 30-year loans to an average 4.46 percent.

Pending Home Sales are released at 10 Eastern this morning and will be reported inside of our Daily Thread.

Yesterday, “Consumer” Confidence was reported lower again, and for once the State Street Investor Confidence report was also lower. Yet the markets continued to bounce on the supposed Greek bailout as if the world was all going to pretend for awhile longer that such a farce was actually possible.

The Gulf oil disaster long forgotten, the fact that we have Fukushima followed by four nuclear plants threatened in the United States and it is garnering no change of policy in the United States is going to be a far greater tragedy than anything produced in Greece. We have pushed the energy envelope far beyond our understanding of nature, but it is our lack of acknowledging that fact when confronted head on that is truly stunning.

As of now the downtrend is still intact, however the markets did manage to get above key overhead resistance yesterday. Below is a daily chart of the DOW, a break above that trendline, now about 12,300, would mean that an uptrend has replaced the downtrend since May:

Remember, that the end of month, beginning of month window dressing is occurring and there are a lot of changes coming in July, such as the end of open POMO. The fireworks around that time should be interesting to watch.

(Reuters) - Bank of America Corp is close to a dealto pay $8.5 billion to settle claims from a group of powerful investors that lost money on mortgage-backed securities, a person familiar with the matter said on Tuesday.

The deal could embolden investors holding mortgage-backed securities filled with now-toxic home loans to pursue claims against other large mortgage lenders such as Wells Fargo & Co and JPMorgan Chase & Co, analysts said.

A settlement, first reported by The Wall Street Journal, would be the largest in the banking industry to date. It would also require approval by Bank of America's board, which met on Tuesday to discuss it, according to the source.

"If you're an investor, you now know this is a potential lottery ticket, and the only way you lose is by not playing," said Matt McCormick, a portfolio manager at Cincinnati-based Bahl & Gaynor Investment Counsel. "You have to think this is the first settlement we'll be seeing in a long line."

After news of a possible settlement, shares rose as much as 3.5 percent from their $10.82 close but later eased to trade around $10.95 after-hours, up about 1 percent.

The largest U.S. bank by assets has been fighting claims by a group of 22 investors over the housing-related securities it packaged and sold before the financial crisis.

Papandreou Wins Budget Vote, Default Risk Falls

Greek Prime Minister George Papandreou clinched enough votes to pass the first part of an austerity plan aimed at meeting European Union aid requirements and staving off default for his debt-laden nation.

Papandreou won by 155 votes to 138, a wider margin than last week’s confidence ballot, as some opposition lawmakers abstained rather than oppose a package that is the condition for further rescue funds. The vote was overshadowed by a 48-hour strike and scuffles outside Parliament that saw police fire tear gas at demonstrators protesting budget cuts and asset sales.

Greek bonds rose as approval of the 78 billion-euro ($112 billion) plan sparked optimism Papandreou can keep the country’s coffers intact for now. Attention now shifts to a second bill tomorrow that authorizes implementation of the measures. Approval would allow Finance Minister Evangelos Venizelos to meet European counterparts on July 3 for talks on releasing a fifth tranche of aid from last year’s 110 billion-euro bailout.

Update 2: Remember the SPR oil release that was somehow magically going to bring the price of oil down to normal levels? Check oil spot. Up almost 2.5% to $92.66pb. Can you say "fail" and on the tax payer's dime?

Main ArticleWith the circus in Fukushima just heating up for the big event, let's not forget the other freakshow sideshow events that have just turned the neon lights on.

In Greece, the countdown to the momentous vote, which will certainly pass, has caused the people to revolt. Those who can see the handwriting on the wall know there are only two outcomes to this event - and both of them end very badly for Europe.

When the vote passes, Greece will be sold off piece by piece to corrupt banksters and other nations (read: China) while severe austerity measures are implemented. The people will protest and riots will erupt across the nation, effectively shutting down the economy. In turn, those overly optimistic GDP "growth" figures the gov't is predicting for 2013 and beyond will never be attained. Thus, this entire show, is simply more radioactive smoke in a mirror filled room.

The other outcome which is highly unlikely, is one whereby if the vote did not pass for some reason, the banksters would moan and groan about bond haircuts, but Greece would leave the EU and return to the Drachma. The Drachma would be set at a value roughly half the current value of the Euro which would give Greece a more competitive currency - one that could compete against other nations. Of course, after analyzing what Greece needed all along, one can see the Euro monetary union was never meant to be. How a group of academics dreamed up this plan without considering the most basic, fundamental factors is beyond us. Then again, being that it waspoison Ivy League academics who concocted this (Dis)Union, explains it all. Ask yourselves, can entirely different nations, with entirely different work ethics, with entirely different social/psychological structures, in entirely different climatic regions really work in union? The answer is obvious.

The BBC is reporting that the Bank of England is planning for a contingency plan in the given event of a Greek default. Certainly this is prudent of them in light of the obvious. Certainly, it would be prudent for all individuals to have in place, a full contingency plan for the "probably inevitable" possibility. Remember, shiny metal is not only used for jewelry.

That's three. The fourth? We get news that the New Jersey Salem reactor 2 has had failure of the cooling pump, and has been forced into "hot shutdown;" not to be confused with cold shutdown. But have no fear or worries. Everything is ok. All four "unusual events" are ok. What's your contingency plan in the case of nuclear meltdowns across the U.S.?

In other news, U.S. consumer confidence has "unexpectedly" plummeted to a 7 month low. Obviously this is a direct result of the "green shoots" of an economic recovery. Remember, there is no inflation. And if there was, Dr. Deficit could fix everything in 15 minutes. Of course, he can't fix "unexpected" bullish global disasters like earthquakes, nuclear meltdowns, food shortages and plagues.

Speaking of plagues, a devastating wheat fungus impacting 11 countries in Africa and the Middle Eastwill take years of work to save the world's wheat. Somehow, we don't think this is deflationary, despite being bullish for the economy, like all other major disasters. Have you seen the price of cereal lately? Better still, have you seen the price of coffee lately? Corn? Dairy? Cotton? Anything that you buy on a regular basis and depend on for survival?

Finally, as the day progresses, keep an eye on European banks (especially German, Italian and French banks) which have absurd levels of exposure to Greek debt, which in turn have exposure to Too Big To Fail, To Corrupt To Fix, banks in the U.S. in one big death spiral pig with lipstick. Don't worry though - Justin Bieber said the economy is going to pick up in the second half of 2011.

Equity futures are continuing to rise during this last week of the month, and last week of scheduled POMOs to the tune, as Carl Sagan would say, “billions and billions.” Unfortunately, with these billions it’s the inverse chance of finding intelligent life. The dollar is down, bonds are down, oil is up, gold & silver are up, and food commodities are mixed.

Yesterday the dollar tried to push through overhead resistance, but that down slopping upper trend line of the descending wedge turned it around once again:

My suspicion is that this wedge will break to the upside once we’re past the end of the month. However, do not rule out the possibility that the “Fed” is still going to be stealthily buying with both hands to keep the façade from falling over. The current façade is built upon nothing but printing and fraudulent accounting. The one supposed bright spot is earnings, but earnings are trumped mark-to-fantasy earnings, just one of many “modern” accounting shenanigans.

This morning April Case-Shiller data was released with the 10 city index coming in positive for the first time in 8 months, up .8% unadjusted. Remember, this data is old, it is for April which is the beginning of spring and thus you expect strength. When seasonally adjusted, this data was flat, 0.0%. Of course any number that is even slightly positive, even if completely weak on a historical basis, gives the shills something to base their latest bottom calls upon. Of course anyone with an ounce of patience and common sense will be far more patient than that – not Econoshill:

HighlightsIndications are building that home prices are beginning to recover, the latest is Case-Shiller data for April that show no change in its adjusted composite index of 10 major metropolitan areas. Case-Shiller data are three-month moving averages which indicate actual gains for April given contraction in prior months. There's still a lot of cities showing negatives but many areas out West, where some of the heaviest of the price contraction hit, are now moving into positive ground including LA and San Francisco. Year-on-year, however, the contraction is deepening, to minus 3.1 percent though this reading is compared against stimulus-boosted sales a year ago.

Unadjusted readings are very positive though seasonality plays a big part in the housing market which benefits from warm weather. The unadjusted composite 10 index is up 0.8 percent in the month though the year-on-year rate remains negative at minus 3.1 percent (the same reading as the adjusted rate).

Today's report falls in line with recent price indications in both the existing and new home sales reports. Housing data tomorrow will be highlighted by pending home sales which the National Association of Realtors has already promised will be very strong.

Below is the entire Case-Shiller report, it’s a much more balanced read than Econoday, however even they inject their hopeful bias, despite pesky facts like having 6 of the 20 cities they track hit new index lows:

No, the home price adjustment is not over. However, a big chunk of it is, and as I’ve pointed out we are nearing the peak of Option-Arm resets and that will continue to pressure prices for at least another year – once that anchor is removed from the market it will at least stand a chance.

Yesterday the Dallas “Fed” Survey plunged to a negative 17.5 reading from the prior negative 7.4. Of course this was unexpected and was hardly mentioned in the business press. When you combine the negative manufacturing data of the past couple of months, you wind up with the most negative situation since 2008, which was formerly the most negative of modern records… well, we just beat that according to this chart compiled by Zero Hedge which shows the combined two month change:

“Consumer” Confidence is released at 10 Eastern – the sun is out, the irradiated birds are singing, nothing but blue skies…

NEW YORK—Signs emerged Monday that investors are weary of historically low Treasury yields, as an auction of two-year notes was met with tepid demand.

The lack of interest in the two-year note sale dragged Treasury prices down, with buyers—excluding primary dealers—showing the least demand in any two-year sale since April 2009. The dealer community, which buys directly from the Treasury and is required to take down any leftover supply, had to eat 64.5% of the afternoon's auction, well above the 53.5% average of the last four auctions and a higher proportion than any of the past 25 sales.

Indirect bidders, which include foreign investors and central banks, scooped up 22%, below the 33.4% average from the past four auctions.

Analysts had expected the two-year note sale to be well received because there was a shortage of high-quality, short-term paper and the market was flush with cash. Instead, it flopped because investors hesitated to pay up for such little return.

"There's just so little yield available," said John Canavan, fixed-income analyst at Stone & McCarthy, adding that the lack of foreign demand has been "a disconcerting trend."

The lackluster sale solidified the first across-the-curve selloff in two weeks, putting a sizeable dent in the Treasury market's three-month bull run. Optimism about a new bailout package for Greece also helped fuel the selloff. But, if Wednesday's pivotal Greek vote to approve an austerity plan doesn't pass, the market will likely reclaim all these losses

Fed Seen Purchasing $300 Billion in Treasuries After QE2

The Federal Reserve will remain the biggest buyer of Treasuries, even after the second round of quantitative easing ends this week, as the central bank uses its $2.86 trillion balance sheet to keep interest rateslow.

While the $600 billion purchase program, known as QE2, winds down, the Fed said June 22 that it will continue to buy Treasuries with proceeds from the maturing debt it currently owns. That could mean purchases of as much as $300 billion of government debt over the next 12 months without adding money to the financial system.

The central bank, which injected $2.3 trillion into the financial system after the collapse of Lehman Brothers Holdings Inc. in September 2008, will continue buying Treasuries to keep market rates down as the economy slows. The purchases are supporting demand at bond auctions while President Barack Obama and Republicans in Congress struggle to close the gap between federal spending and income by between $2 trillion and $4 trillion.

Main Article"... and you thought you were safe..." is how we will begin today's article. Like the traffic signal at a dangerous intersection that is installed only after many close calls and a deadly accident, we see the consequences of ignoring danger after many warnings with the two nuclear power plants at Ft. Calhoun and Cooper. Yesterday, the protective Aqua-dam berm surrounding the Ft. Calhoun burst and collapsed, sending thousands of tons of flood waters into the buildings at the plant. The plant is now running on emergency generators as workers try to restore power to the main electrical transformers. Needless to say, exactly as the events occurred in Japan, officials assured the public that no residents are in any danger at all. Everything is ok. One week ago, before this Aqua-dam berm collapsed, the NRC said there was no need of the fuel casks to be protected. We hope they don't have to eat their filthy lying words. We have a bad feeling about this - just as we did with Fukushima. Keep your eyes open as this situation intensifies (and more officials reassure that everything is ok, then you know to get out of dodge).

We have been reporting since day 2.5 that the situation in Fukushima is far, far worse than officially reported. It turns out, we were right. Fukushima residents' urine is now radioactive. More than 3 mSv of radiation has been detected in the urine of residents living 30-40 km from the stricken plant. Is it not alarming that 30-40km is within the "safe zone" and Japan is just now doing testing? Don't worry, everything is ok. Radioactive tea leaves are healthy, deformed rabbits are more tasty and nutritious, and pregnant woman who are happy and not negative about this catastrophe are resistant to the "unhealthy" kind of radiation - not be confused with the healthy kind.

For those of you keeping tabs, in three months time, those residents have accumulated 35% of the total amount of radiation nuclear workers can be exposed to in an entire year. Of course, by extrapolating this data, this indicates by early November, regular citizens (including children and pregnant women) living inside the gov't mandated "safe zone" will be exposed to the maximum amount of radiation nuclear workers are allowed by law - until that law is changed of course, because radiation is suddenly healthy for carbon based life forms.

Now, if we're all still alive in a few months after being irradiated from "healthy" radiation, we'll still have to be concerned with the worsening global economy. The Dallas Fed Manufacturing index plummeted to negative 17.5 from negative 7.4 on comical expectations of negative 3.2. No further comments are necessary. As every excuse in the book (including, the dog ate the positive data on page 2) has already been used by MSM to explain all of the horrific economic data and somehow spin it into positive news, they may soon be forced to admit the truth about this so-called economic recovery. Even Geroge Soros is jumping ship and saying 1) it is "probably inevitable" (read: a given) that "a country" (read: Greece) will leave the Euro and 2) "we are on the edge of financial collapse." Why would he say that if we're in recovery mode since June of 2009? Remember, profits on Wall Street are not indicative of economic activity - profits on Wall Street are indicative of fatter bankster bonuses and the level of greed.

This week is the big week for Greece as tensions rise and the situation spirals out of control. Starting tomorrow, a General Strike will shut the whole country down. Despite the theatrics, we already know which way the politicians will vote - with the banksters. That being said, the people will not accept that and further strikes and further protests will result. Like all death spirals, the outcome is always bad.

Equity futures are slightly higher this morning with the dollar poking through, but then retreating from the top of the descending wedge it’s been testing. Bonds are flat, oil is lower ($90 range), gold & silver are lower with gold sitting on the $1,500 mark (up slopping support $1,410ish), and most food commodities are lower with corn gapping significantly lower.

Commodities continue to correct with, I think, the perception that QE is about to go away. That perception is not exactly correct, as I pointed out that in the last FOMC minutes they reiterated that they would continue to “reinvest bond principle,” which is just another way of stating that they would continue to print, but not quite as much as before. “Reinvesting bond principle” is a deceptive trick designed to lead you to believe that it’s just a roll-over operation… but that is certainly not true. Normally debt that matures simply goes away, it is retired. Not retiring debt that has matured is exactly the same thing as just creating money from nothing – again, it is just money printing, to use what is now quaint terminology.

Bloomberg actually picked up on this, but of course is not calling it printing as they are nothing but front men for the private “Fed.” Still, there are grains of truth here that should be understood:

The Federal Reserve will remain the biggest buyer of Treasuries, even after the second round of quantitative easing ends this week, as the central bank uses its $2.86 trillion balance sheet to keep interest rates low.

While the $600 billion purchase program, known as QE2, winds down, the Fed said June 22 that it will continue to buy Treasuries with proceeds from the maturing debt it currently owns. That could mean purchases of as much as $300 billion of government debt over the next 12 months without adding money to the financial system.

The central bank, which injected $2.3 trillion into the financial system after the collapse of Lehman Brothers Holdings Inc. in September 2008, will continue buying Treasuries to keep market rates down as the economy slows. The purchases are supporting demand at bond auctions while President Barack Obama and Republicans in Congress struggle to close the gap between federal spending and income by between $2 trillion and $4 trillion.

“I don’t think the Fed wants to remove accommodation in any way, shape or form,” said Matt Toms, the head of U.S. public fixed-income investments at Atlanta-based ING Investment Management, which oversees more than $500 billion. “It’s quite natural for them to reinvest cash,” he said. “That effectively maintains the accommodative stance.”

Still, this is significantly less accommodation than the continual growth in balance sheet debt that has been occurring. I don’t think they can just let the status quo be, they must continue to grow the numbers or the forces of deflation will quickly take over – you can already see that in commodities and especially in the financials where the rotting insolvency continues to fester.

That rot is clearly seen in the charts. Below is the XLF which on Friday produced a “Death Cross” with the 50dma crossing below the 200dma. Not only that, but the upper Bollinger band is in the same location as the cross – that will provide serious overhead on the next rally attempt:

The $BKX Index is even worse, it produced a Death Cross about a week ago. Both of these crosses have largely gone unnoticed, but have significant implications for the broad market:

The disconnect between warning signs like those and the pumping in the mainstream has never been bigger. CNN published an article with a chart (I won’t show) projecting future stock price possibilities that were higher, way higher, and only slightly lower – of course completely ignoring where stocks would be if even a small portion of the graft were removed. And on Bloomberg it’s all about “analysts” moving their revenue projections up next year, as if never ending growth will never end. Of course the weight of exponential math ensures that it will end.

The Economic Calendar is fairly light this week with Consumer Confidence tomorrow, the Manufacturing ISM and Construction Spending on Friday. I’m sure that falling oil prices may boost Confidence which is exactly the ploy in releasing oil from the strategic reserves – purely political, but there are many potential consequences to irrational actions like this. Zero Hedge did a piece on those potential consequences, it’s worth a read: As The IEA-OPEC Nash Equilibrium Collapses, Is A 1973-Style OPEC Embargo Next?

Personal Income and Outlays were reported this morning and it was softer than expected pretty much all the way around. Incomes supposedly grew .3% in May, but that was below consensus and April’s number was also revised lower. Of course prices were higher against Consumer Spending that was 0.0, flat, month to month despite all the money debasing, which shows you how quickly deflationary forces can move back in – still, it’s only one month’s number and year over year is still up, but is decelerating from the prior month. Again, these numbers are in no way “real,” as measuring in a devalued currency produces apparent growth, not real growth. And when you monkey with the statistics, you have little real information to go on – thus $1,500 for gold doesn’t seem like such a stretch, does it? Here’s Econospin on the numbers:

HighlightsIn May, income growth was moderate but spending was flat largely on a dip in auto sales with gasoline appearing to also weigh down. Inflation news is mixed. Personal income in May rose 0.3 percent, matching the gain the month before. The latest figure came in lower than analysts' expectation for a 0.4 percent advance. Wages & salaries increased a modest percent, following a rise of 0.4 percent in April. This component was softened by no change in the government subcomponent.

Personal spending weakened in May, posting at no change, following a 0.3 percent boost the prior month. The median market forecast called for no change. By components, durables dropped 1.5 percent after no change in April. Nondurables dipped 0.3 percent, following a 0.2 percent rise the month before. Services gained 0.2 percent, following a 0.1 percent slip in April. Within PCEs, the drop in durables likely was related to shortages of autos dependent upon Japanese parts. The nondurables dip probably was due in large part to a decline in gasoline prices.

On the inflation front, the headline PCE price index eased to a 0.2 percent rise from 0.3 percent in April. However, the core rate edged up to 0.3 percent from 0.2 percent in April. The consensus projected a 0.2 percent rise for the core for the latest month.

On a year-ago basis, headline PCE inflation rose to 2.5 percent from 2.2 percent in April. Core PCE price inflation firmed to 1.2 percent on a year-ago basis from 1.1 percent in April.

Year on year, personal income growth for May printed at 4.2 percent, compared to 4.4 percent the month before. PCEs growth rose a year-ago 4.7 percent, down from 4.8 percent the prior month.

Today's personal income report adds to the "soft patch" scenario. Income is still growing but not at a strong enough pace for the latest month. And spending is flat. However, there are arguments that the softness is transitory. Improvement in employment would boost income. An easing of supply disruptions in the auto sector will likely lead a rise in durables spending. However, nondurables will likely weighed down by additional near-term declines in gasoline prices.

Waves of inflation and deflation as the deflationary forces of debt saturation fight against a determined private group of narcissist bankers hell bent on creating inflation to keep their Ferraris out of the repossessor’s hands.

This post is in partnership with Worldcrunch, a new global-news site that translates stories of note in foreign languages into English. The article below was originally published inThe Economic Observer.

(BEIJING) - Just how many corrupt Chinese government officials have fled overseas? How much money have they stashed away? And how did they manage to transfer such colossal sums abroad?

Last week the Bank of China published a report entitled "How corrupt officials transfer assets overseas, and a study of monitoring." The report quoted statistics based on research by the Chinese Academy of Social Sciences. Since 1990, the number of Communist Party and government officials, public security members, judicial cadres, agents of State institutions, and senior management figures of state-owned enterprises fleeing China has reached nearly 18,000. Also missing is about 800 billion yuan (more than $120 billion). (See photos of the flooding in China.

A look at the chart of the inverse China Stock Index ETF -- the ProShares UltraShort FTSE/XINHUA 25 Stock Index (FXP) -- suggests strongly that slowing Chinese growth and climbing inflation remain part of the problem, not part of the solution -- at least, not yet.

As we noted for subscribers last night, Wednesday's sharp afternoon advance in the FXP after the morning's weakness positions the inverse China ETF to accelerate to the upside towards a test of multi-month resistance between 32.00 and 33.00. If hurdled, this will confirm the upside breakout from a major base formation that has the potential to propel the FXP to 39.00-41.00 in the weeks ahead.

Let's notice that the price structure has carved out a significant "W" pattern, which represents accumulation of the FXP -- or price distribution within the iShares FTSE China 25 Index Fund (FXI). In either case, the pattern forewarns us to expect potentially serious negativity and equity liquidation in the China equity markets in the weeks immediately ahead.

While I have no idea what the fundamental story will be, I strongly suspect the global stock markets are entering a period of vulnerability to the China headline risk.

Upside Breakout for China Short ETF

by Mike Paulenoff, Thu June 23rd, 2011

A look at the chart of the inverse China Stock Index ETF -- the ProShares UltraShort FTSE/XINHUA 25 Stock Index (FXP) -- suggests strongly that slowing Chinese growth and climbing inflation remain part of the problem, not part of the solution -- at least, not yet.

As we noted for subscribers last night, Wednesday's sharp afternoon advance in the FXP after the morning's weakness positions the inverse China ETF to accelerate to the upside towards a test of multi-month resistance between 32.00 and 33.00. If hurdled, this will confirm the upside breakout from a major base formation that has the potential to propel the FXP to 39.00-41.00 in the weeks ahead.

Let's notice that the price structure has carved out a significant "W" pattern, which represents accumulation of the FXP -- or price distribution within the iShares FTSE China 25 Index Fund (FXI). In either case, the pattern forewarns us to expect potentially serious negativity and equity liquidation in the China equity markets in the weeks immediately ahead

Main ArticleTwo days ago, Dr. Deficit finally admitted to defeat not understanding why his Harvard endorsed fiat printing plan was not working. "We don't have a precise read on why this slower pace of growth is persisting," he said. In Fed speak, that means, "we're clueless why there is no recovery." More interesting was his comment that this "soft patch" was not as "transitory" as they first thought. Act surprised, if you can.

As we have explained in great detail, the bearer of a Harvard PhD usually does not have the capacity to think on his own. There is an inverse correlation to the higher degree one possesses to their ability to use common sense. Those who have been indoctrinated by poison Ivy League academia, are all cut from the same cookie cutter mold - which can be especially problematic in the real world, as life and all that it encompasses is dynamic and changing. The book, "Print Your Way To Wealth," which happens to be required reading for all poison Ivy League students, is obviously outmoded. Worse, we think Dr. Deficit was not only a prodigy of the original authors, he became a co-author of the updated 2008 edition of the book - just in time for the new round of grads with PhD's to come online.

Therefore, we highly recommend that all those who read that book please clear their minds and start fresh with some very basic information that is obviously no longer taught in poison Ivy League schools, but obviously is still appreciated in Europe. We present to you a simple 5 step process that would right the wrongs of the bad good Doctor.

1) During the worst economic depression recession the world has ever seen, the effective tax rate of the top 10% of the wealthiest was only 17% tax. Cutting taxes for the rich, which is somehow supposed to stimulate the economy as we were taught in finishing school, is never a good move when the nation is deep in debt and needs revenues more than ever. One thing about the wealthy is they can never have enough money. Which means that money goes nowhere but their pockets.

2) Jobs in this country have vanished (as can been seen by the 23% real unemployment rate). Nearly all manufacturing is done offshore. Nearly all tech support, computer programming and IT has been also exported offshore. We are left with hamburger flippers and Home Depot clerks. Servicing one another does not make for a strong economy. Bring the manufacturing jobs back. Penalize all corporations that manufacture offshore. Increase their tax rates and especially increase taxes on executive stock options to 80%.

3) We need clean, renewable and affordable energy and a strong manufacturing base that supports that. All new clean energy projects should be engineered and built here in the U.S. with skilled American workers. Find new ways to make coal cleaner while we make the transition over to renewable energy, and in order to keep the price of electricity low.

4) Invest in education. Budget cuts to education is the worst sacrifice anyone can make. Education is key to the success and future of a strong economy. Education empowers and benefits all. College these days is simply, not worth the expense. Vocational schools today provide better skills that will be needed to build a new economy.

5) ZIRP interest rates at zero hurt savers, and encourages reckless spending and debt. And debt is never good for the people - only the banksters benefit from more debt and that is why they love you to have more and more.

Of course, these are just a few of the very basic, fundamental steps that should have been implemented long ago. Other steps include changing the accounting rules for big corporations that allow them to offshore their profits, and ending once and for all "Too Big To Fail." Once anything becomes "Too Big To Fail," it's already too dangerous. Further, "creative accounting" should never be tolerated.

The point here is, we never hear anything from Dr. Deficit and Co. about any such measures. Instead all we hear is how they are keeping inflation low (which is not even close to low - try 11% or more) and will implement more POMO (aka, more money printing) and how good of a job they are doing, and that everything will get better tomorrow.

Which reminds us of the "perpetual bonds" that Greece issued a few months ago. They are called "perpetual bonds" because they usually mature in 50-100 years (a lot can happen in 50-100 years, making them worthless) and usually, the current payments are made with the issuance of yet more bonds, in an endless cycle. Sort of like the handouts bailouts Greece is getting.

Speaking of handouts money printing, let's be clear here - just because the money is not actually printed on physical paper does not mean that they are not "printing" as we have highlighted many times here. "Printing" comes in many forms. Their favorite method is digital dollars in the form of zeros; soon, zeros will be the only thing they have.

With all of the drama being pumped out of the MSM about Weiner's weiner or Arnold's love child or Justin Bieber's new cologne, most sheeple forgot to realize or take notice that inflation is all around us. Coffee has jumped 40% in the past year alone. Sugar is up 70%. And meats? Forgetaboutit! Some who see the real non-manipulated data are saying the real plague is inflation. Others, like Dr. Deficit are still saying, "inflation? what inflation..." and cut scene.

And here's a piece of news that should wake up those with a PhD in BS - weather plays a huge part in the economy of the U.S. (Well, well, well. Where have we said that before?) Which is why we here at Fiat's Fire pay attention to what the earth is doing. If the earth's weather was stable everyday and presented no major weather related threats, the global economy would still be a disaster. Just look at the comedy show in Greece where the weather is stable. Now, insert the most unpredictable and powerful variable called "weather," and a whole new dimension in global financial forecasting emerges. And to the talking heads on CNBS that said Fukushima was a "bullish event," we suggest you take an early retirement.

Finally, we report the continued moral breakdown of society (a key symptom and consequence of the gangrened world in which we live) and present to you this story from China where a young girl is offering her virginity to anyone who will buy her an iPhone4. We offer her the same advice as we did to the boy in China who sold his kidney for an iPad2 - wake up from your consumerism induced coma before it is too late. Contrary to what big business wants you to believe, happiness in life does not result from the things one possesses.